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Here's Why You Should Hold Teladoc Health (TDOC) in Your Portfolio
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Shares of Teladoc Health, Inc. (TDOC - Free Report) have been on a downslide this year after having a great run on the bourses last year. The telehealth company, which provides medical consultation to patients saw tremendous demand for its products and services last year as COVID-19 kept people confined to their homes to stem the coronavirus spread.
In 2020, the stock surged 138%, trouncing the S&P 500 increase of 15.3% But this year, the stock climbed down in position on investors’ favorite list. As the grip of coronavirus started easing, vaccinations became rife and restrictions on venturing out were lifted, the stock witnessed a continuous decline.
So far this year, the stock has fallen 20.9% against the S&P 500's rise of 14.7%.
Image Source: Zacks Investment Research
What’s Dragging the Stock?
It is being seen that as people start going outdoors, the visit to clinics and physicians will resume. After all, face to face or in-person consultation is more satisfactory than online/virtual treatment. Since telemedicine was the only option left and was mostly due to social distancing enforced by COVID, now with the infection subsiding, demand for Teladoc’s services will be tepid.
A glimpse of this weakness was seen in the company’s guidance for 2021, which calls for 82% growth in revenues, indicating a decrease from the 98% rise registered in 2020. Total visits will likely inch up 2.6%, implying a fall from 206% growth recorded in 2020 while U.S paid membership is expected to rise 2.3%, suggesting a deterioration from the 41% increase seen in 2020. U.S Fee Only Access is projected to be up 5.6%, hinting at a decline from the 10% rise reported in 2020.
These figures clearly point that the roaring growth rate achieved in 2020 will not be replicated by any means this year.
While on one hand, demand is tapering, on the other, competition is heating up. Recently, many telehealth companies with the likes of American Well Corporation (AMWL - Free Report) and SOC Telemed, Inc. came out with their Initial Public Offering (IPO) in order to scale up their operations. Moreover, the space also attracted the retail behemoth Amazon.com, Inc. (AMZN - Free Report) , which launched its remote care product Amazon Care. Cigna Corp. (CI) also acquired the telehealth company MDLive
Is All Lost?
No. It will be an overstatement to say that all will start visiting the doctor’s clinics. If not wholly, some part of the migration of health to online will continue to stay. Moreover, it depends on how the Delta variant of the coronavirus pans out. If the COVID cases rise once again, the share of virtual consultation also rise along with it.
Though it is clear that the telehealth space is getting crowded but the company enjoys the first mover advantage in the industry. It is the oldest company in the space and has fortified its business very well by making acquisitions, forging partnerships with insurance companies and hospitals, adding products and services, which help it to cross sell its products. Its last year acquisition of Livongo for $18.5 billion helped it maintain its leadership position in the industry.
The company’s CEO recently said that the set of capabilities, the scale, the breadth of the company’s clinical solutions and the depth of its ability to use data and data science to massively improve the quality of care is unmatched in the market.
Now What?
There is nothing much to do at this point of time other than just wait and watch. More information about the takers of the company’s service denoted by its utilization rate will be seen in the second quarter earnings, most likely due later this month. Utilization rates were strong in the March quarter and if this momentum is maintained in the June quarter, then telehealth consultation can be assumed to have been used widely.
Thus for now, it is advisable to retain the Teladoc stock in your investment portfolio.
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Image: Shutterstock
Here's Why You Should Hold Teladoc Health (TDOC) in Your Portfolio
Shares of Teladoc Health, Inc. (TDOC - Free Report) have been on a downslide this year after having a great run on the bourses last year. The telehealth company, which provides medical consultation to patients saw tremendous demand for its products and services last year as COVID-19 kept people confined to their homes to stem the coronavirus spread.
In 2020, the stock surged 138%, trouncing the S&P 500 increase of 15.3%
But this year, the stock climbed down in position on investors’ favorite list. As the grip of coronavirus started easing, vaccinations became rife and restrictions on venturing out were lifted, the stock witnessed a continuous decline.
So far this year, the stock has fallen 20.9% against the S&P 500's rise of 14.7%.
What’s Dragging the Stock?
It is being seen that as people start going outdoors, the visit to clinics and physicians will resume. After all, face to face or in-person consultation is more satisfactory than online/virtual treatment. Since telemedicine was the only option left and was mostly due to social distancing enforced by COVID, now with the infection subsiding, demand for Teladoc’s services will be tepid.
A glimpse of this weakness was seen in the company’s guidance for 2021, which calls for 82% growth in revenues, indicating a decrease from the 98% rise registered in 2020. Total visits will likely inch up 2.6%, implying a fall from 206% growth recorded in 2020 while U.S paid membership is expected to rise 2.3%, suggesting a deterioration from the 41% increase seen in 2020. U.S Fee Only Access is projected to be up 5.6%, hinting at a decline from the 10% rise reported in 2020.
These figures clearly point that the roaring growth rate achieved in 2020 will not be replicated by any means this year.
While on one hand, demand is tapering, on the other, competition is heating up. Recently, many telehealth companies with the likes of American Well Corporation (AMWL - Free Report) and SOC Telemed, Inc. came out with their Initial Public Offering (IPO) in order to scale up their operations. Moreover, the space also attracted the retail behemoth Amazon.com, Inc. (AMZN - Free Report) , which launched its remote care product Amazon Care. Cigna Corp. (CI) also acquired the telehealth company MDLive
Is All Lost?
No. It will be an overstatement to say that all will start visiting the doctor’s clinics. If not wholly, some part of the migration of health to online will continue to stay. Moreover, it depends on how the Delta variant of the coronavirus pans out. If the COVID cases rise once again, the share of virtual consultation also rise along with it.
Though it is clear that the telehealth space is getting crowded but the company enjoys the first mover advantage in the industry. It is the oldest company in the space and has fortified its business very well by making acquisitions, forging partnerships with insurance companies and hospitals, adding products and services, which help it to cross sell its products. Its last year acquisition of Livongo for $18.5 billion helped it maintain its leadership position in the industry.
The company’s CEO recently said that the set of capabilities, the scale, the breadth of the company’s clinical solutions and the depth of its ability to use data and data science to massively improve the quality of care is unmatched in the market.
Now What?
There is nothing much to do at this point of time other than just wait and watch. More information about the takers of the company’s service denoted by its utilization rate will be seen in the second quarter earnings, most likely due later this month. Utilization rates were strong in the March quarter and if this momentum is maintained in the June quarter, then telehealth consultation can be assumed to have been used widely.
Thus for now, it is advisable to retain the Teladoc stock in your investment portfolio.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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